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Real-time conditional forecasts with Bayesian VARs: An application to New Zealand

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  • Bloor, Chris
  • Matheson, Troy

Abstract

Abstract We develop a Bayesian VAR (BVAR) to produce conditional forecasts for the New Zealand economy. In a real-time out-of-sample forecasting exercise, we find that the BVAR outperforms a selection of other time series models, and it yields forecasts of similar accuracy to the forecasts produced internally at the Reserve Bank of New Zealand. Examining shock decompositions, we also highlight the importance of foreign shocks for the New Zealand economy. Our results suggest that the BVAR is a useful tool for policy making in real time.

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Bibliographic Info

Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 22 (2011)
Issue (Month): 1 (January)
Pages: 26-42

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Handle: RePEc:eee:ecofin:v:22:y:2011:i:1:p:26-42

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Web page: http://www.elsevier.com/locate/inca/620163

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Keywords: Bayesian VAR Conditional forecasts Real time;

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References

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Citations

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Cited by:
  1. Chris McDonald, 2012. "Kiwi drivers the New Zealand dollar experience," Reserve Bank of New Zealand Analytical Notes series AN2012/02, Reserve Bank of New Zealand.
  2. Simone Auer, 2014. "Monetary Policy Shocks and Foreign Investment Income: Evidence from a large Bayesian VAR," Working Papers 2014-02, Swiss National Bank.
  3. Chris McDonald & Leif Anders Thorsrud, 2011. "Evaluating density forecasts: model combination strategies versus the RBNZ," Reserve Bank of New Zealand Discussion Paper Series DP2011/03, Reserve Bank of New Zealand.
  4. Karlsson, Sune, 2012. "Forecasting with Bayesian Vector Autoregressions," Working Papers 2012:12, Örebro University, School of Business.
  5. Giannone, Domenico & Lenza, Michele & Primiceri, Giorgio E., 2012. "Prior selection for vector autoregressions," Working Paper Series 1494, European Central Bank.
  6. Öğünç, Fethi & Akdoğan, Kurmaş & Başer, Selen & Chadwick, Meltem Gülenay & Ertuğ, Dilara & Hülagü, Timur & Kösem, Sevim & Özmen, Mustafa Utku & Tekatlı, Necati, 2013. "Short-term inflation forecasting models for Turkey and a forecast combination analysis," Economic Modelling, Elsevier, vol. 33(C), pages 312-325.
  7. Chris Bloor, 2009. "The use of statistical forecasting models at the Reserve Bank of New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 21-26, June.
  8. Henzel, Steffen R. & Mayr, Johannes, 2013. "The mechanics of VAR forecast pooling—A DSGE model based Monte Carlo study," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 1-24.

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